FARM MANAGEMENT ENTERPRISE BUDGETING Name: 1. Rather than developing an enterprise budget from scratch, it is often casier to begin with one developed by your state Cooperative Extension Service or some other source and modify it to fit your individual situation. Assume you are currently farming and have been given the opportunity to rent an adjoining 300 acres where you would grow only com. You would like to know if it would be profitable to rent this land. To help with your decision, you have acquired the attached enterprise budget for com but feel you must make the following changes for the budget to fit your situation. Use the right-hand column to calculate your modified com enterprise budget. (If no change, use budget value.) o Com price is now expected to be $4.40 per bu, and you expect 160 bu, per acre. (Note yield change affects hauling costs. o Seed price is now $2.50 per 1000 se o You can now buy fertilizer for $0.50 per pound. Application cost is the same. Herbicide is now $6.75 per pound. Tractor & machinery variable costs should be 25% higher than budget values. You would like to make $15.00 per hour for your labor and your big machinery should reduce labor needs to 1.8 hours per acre. o Opportunity cost of your capital is 5% o Machinery and tractor fixed costs should be only 85% of budget values. . You can rent the land for $175.00 per acre. o Custom combine now costs $32.50 per acre QUESTIONS 1. Would you rent the land for $175,00 per acre? Why? 2. If the price of com turns out to be $3.75 per bu., what yield would be necessary to just cover all costs including your labor cost. (Ignore the change in hauling cost.) 3. What will be the breakeven price at current levels of production of 160 bu. per acre? CORN Price or Cost Per Unit Quantity Valusor. Cost Your Figures $4.00 140 bu S560.00 1. GROSS RECEIPTS CORN 2. VARIABLE COSTS Prcharvest Seed Fertilizer (N) Fertilizer application Herbicide Machinery Tractors $2.25 0.40 3.00 30,000 seeds 100.0 lbs. 1.0 acre $67,50 $40.00 3.00 6,00 6.00 24,00 6,00 4.0 lbs. 1.0 acre 1.0 acre 2.1 hrs. 10.40 10.40 25.20 12.00 5% 4.40 $180.50 Labor Interest on V.C. (for 6 months) Subtotal Harvest Costs Custom combine Custom haul Subtotal Total Variable Cost 3. INCOME ABOVE VARIABLE COST 30,00 30.00 0.10 1.0 acre 140 bu. 14.00 $44.00 $224.50 $335.50 18.20 1.0 acre 18.20 4. FIXED COSTS Machinery Tractors Land 1.0 acre 36.00 36.00 160,00 1.0 acre Total Fixed Costs 160.00 $214.20 S439.00 5. TOTAL. COSTS 6. NET RETURNS $121.00